Health Care Law Upheld in Fractured Court Ruling

By Kenneth Jost
Supreme Court Editor, CQ Press

President Obama’s health care overhaul survived a Supreme Court showdown largely intact on Thursday even as a majority of justices rejected the rationale for its central provision, the individual health insurance mandate.

By separate 5-4 votes, the court upheld the Affordable Care Act’s individual mandate as a tax provision even as a different majority declared that Congress exceeded its Commerce Clause power by requiring individuals to buy health insurance if they did not want to do so.

In a separate, also fractured, ruling, the court upheld the act’s major expansion of the joint federal-state Medicaid health insurance program for the poor, but limited the possible penalty for states that decide not to go along with the change.

A seven-justice majority said the act’s provision withholding all Medicaid funding from any state that did not agree was unconstitutionally coercive on the states. But five justices ruled that the Medicaid expansion could go forward if non-participating states forfeited only the additional federal funds for covering individuals with incomes up to one-third above the federal poverty line.

The court’s ruling gave Obama a victory of sorts on a law whose most controversial provision — the individual mandate — is not set to take effect until 2014. Some popular provisions, such as family coverage for children up to age 26, have taken effect. Congress gave the bill final approval in March 2010 on the strength of a Democratic majority in both the House and the Senate; Republicans gained control of the House in November 2010 in part by capitalizing on opposition to the mandate and vowing to try to repeal the law in its entirety.

Chief Justice John G. Roberts Jr. delivered the decision in the court’s final session of the term in an opinion that no other justice joined in toto. Four conservative justices led by Anthony M. Kennedy joined Roberts in rejecting the individual mandate as a way to regulate how to pay for health care. But the conservative bloc dissented from the decision calling the provision a tax penalty and upholding it on that ground. Four liberal justices led by Ruth Bader Ginsburg argued that the individual mandate was constitutional as an exercise of Congress’s power to regulate interstate commerce but went along with Roberts in upholding the provision as an exercise of Congress’s taxing power.

Both Kennedy and Ginsburg read major portions of their dissents from the bench, an occasional step for a justice to emphasize his or her disagreement. The courtroom was silent for virtually the entire 50-minute session even as hundreds of noisy demonstrators massed outside the Supreme Court plaza carrying placards either supporting or opposing the health care law.

The court’s decision in National Federation of Independent Business v. Sebelius, available here, challenged understanding as Roberts announced it. The law appeared to be doomed as Roberts described the individual mandate as an unprecedented requirement to force individuals “to become active in commerce” in order to regulate their conduct. But in what Kennedy aptly described as “a pivot,” Roberts went on to rule that the act’s enforcement provision – section 5000a – was within Congress’s power as “in effect a tax on those who do not have insurance.”

Roberts similarly seemed set to dispose of the Medicaid expansion after describing the threatened withdrawal of all funds from non-participating states as “a gun to the head.” But he reversed direction to say that the expansion is valid if the penalty is limited to the loss of new funds. The government pays 100 percent of the expanded coverage, with its portion declining to 90 percent by 2020.

The dissenters — in an opinion listed as jointly authored by Kennedy and Justices Antonin Scalia, Clarence Thomas and Samuel A. Alito Jr. — said they would have ruled the law invalid in its entirety. Kennedy mocked the majority’s decision to uphold the mandate on terms that both Congress and Obama repeatedly disclaimed. “What Congress calls a penalty the Court calls a tax,” Kennedy said.

Kennedy similarly criticized the majority’s rewriting of the Medicaid provision. The ruling, he said, “leaves states with no reasonable choice but to” agree to the expansion of the program.

Ginsburg spoke for herself and the other three liberal justices — Stephen G. Breyer, Sonia Sotomayor and Elena Kagan — in arguing for upholding the mandate as economic regulation. The provision, she said, amounted to a requirement to “prepay for medical care through insurance.”
     
The liberal justices split on the penalty provision of the Medicaid expansion. Breyer and Kagan joined Roberts and the conservatives in striking down the penalty for non-participating states as too severe. Ginsburg and Sotomayor said they would have upheld the law as written but voted with Roberts, Breyer and Kagan to save it after narrowing the penalty for states that do not go along.
     
Unless repealed, the penalty for not buying health insurance is now set to go into effect on Jan. 1, 2014, starting at $95 or 1 percent of taxable income. The penalty would rise to $695 or 2.5 percent of taxable income in 2016, subject to cost-of-living adjustments in later years. The law exempts, among others, people with financial hardships or with incomes below the federal income tax threshold.